Netgear 2013 Annual Report Download - page 88

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and $7.0 million , respectively. The terms of some of the Company’
s office leases provide for rental payments on a graduated scale. The Company
recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid.
Future minimum lease payments under non-cancelable operating leases are as follows (in thousands):
Employment Agreements
The Company has signed various employment agreements with key executives pursuant to which, if their employment is terminated without cause,
such employees are entitled to receive their base salary (and commission or bonus, as applicable) for 52 weeks (for the Chief Executive Officer), 39
weeks (for the Senior Vice President of Worldwide Operations and Support) and up to 26 weeks (for other key executives). Such employees will also
continue to have stock options vest for up to a one -
year period following such termination without cause. If a termination without cause or resignation
for good reason occurs within one year
of a change in control, such employees are entitled to full acceleration (for the Chief Executive Officer) and up
to two years acceleration (for other key executives) of any unvested portion of his or her equity awards.
Purchase Obligations
The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50%
of orders
are cancelable by giving notice 46 to 60 days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31 to 45
days prior
to the expected shipment date. Orders are non-cancelable within 30 days prior to the expected shipment date. At December 31, 2013
, the Company had
$187.3 million in non-
cancelable purchase commitments with suppliers. The Company establishes a loss liability for all products it does not expect to
sell for which it has committed purchases from suppliers. Such losses have not been material to date.
Guarantees and Indemnifications
The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or
occurrences, subject to certain limits, while the officer or director is or was serving at the Company’
s request in such capacity. The term of the
indemnification period is for the officer’s or director’
s lifetime. The maximum amount of potential future indemnification is unlimited; however, the
Company has a Director and Officer Insurance Policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a result
of its insurance policy coverage, the Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has
no
liabilities recorded for these agreements as of December 31, 2013 .
In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers for any expenses or liability
resulting from claimed infringements of patents, trademarks or copyrights of third parties. The terms of these indemnification agreements are generally
perpetual any time after execution of the agreement. The maximum amount of potential future indemnification is unlimited. The Company believes the
estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of
December 31,
2013 .
Litigation and Other Legal Matters
The Company is involved in disputes, litigation, and other legal actions, including, but not limited to, the matters described below. In all cases, at
each reporting period, the Company evaluates whether or not a potential loss amount or a potential range
85
Year Ending December 31,
2014
$
2,987
2015
9,242
2016
6,005
2017
5,028
2018
4,697
Thereafter
5,990
Total minimum lease payments
$
33,949